When Nigeria’s struggling airlines catch the virus

Since March 27, domestic flights in Nigeria have been grounded as the country locks down during the coronavirus pandemic. The struggling airline industry is now in a fight for its life and the millions who depend on it.   Nigerian airlines have for years been contending with harsh operating environment characterized by multiple taxes and […]

Since March 27, domestic flights in Nigeria have been grounded as the country locks down during the coronavirus pandemic. The struggling airline industry is now in a fight for its life and the millions who depend on it.

 

Nigerian airlines have for years been contending with harsh operating environment characterized by multiple taxes and charges and high cost of operation, especially the exorbitant cost of aviation fuel (Jet A1), which have made the industry unattractive to potential investors.

However, the patriotic zeal to not allow foreign carriers completely take over the nation’s airspace has kept some airlines in business. But unfortunately, the impacts of the COVID-19 pandemic has compounded these challenges, grounding all flights  and disrupting their projections.

The disruption has exposed Nigerian carriers to acute financial losses with potential negative impact on thousands of jobs if nothing is done by the Federal Government to aid the carriers.

Recently, the International Air Transport Association (IATA) painted a worrisome picture of what the nation’s aviation sector would become unless some urgent fiscal interventions are made by government to pull the airlines out of the abyss.

IATA, representing over 290 airlines around the world, had while listing the economic implications of the COVID-19 crisis on a state-by-state basis, projected that the disruption might result in 853,000 loss in passenger volume and $170m (about N62bn) loss in revenue base for Nigerian carriers.

If the situation continues further, it said, approximately 2.2 million passengers and $434m in revenue could be lost, and therefore appealed to governments in Africa and the Middle East “as part of a worldwide campaign, to provide emergency support to airlines as they too fight for survival.”

In another analysis released recently, IATA said some 25 million jobs are at risk of disappearing.

Globally, the livelihoods of some 65.5 million people are dependent on the aviation industry, including sectors such as travel and tourism. According to IATA research, if travel restrictions last three months, about 25 million jobs in aviation and related sectors will be endangered worldwide.

The association predicted 11.2 million job losses in Asia-Pacific; 5.6 million jobs in Europe; 2.9 million jobs in South America; 2 million jobs in North America; and the same number in Africa and 0.9 million jobs in the Middle East.

“There are no words to adequately describe the devastating impact of COVID-19 on the airline industry. And the economic pain will be shared by 25 million people who work in jobs dependent upon airlines. Airlines must be viable businesses so that they can lead the recovery when the pandemic is contained. A lifeline to the airlines now is critical,” IATA’s Director General and CEO, Alexandre de Juniac, said.

By March 27, all the domestic airlines in Nigeria suspended  about 200 total daily, flights sending workers on compulsory leave.

Air Peace with 70 per cent of the daily flights operating about 90 flights everyday will no doubt suffer the biggest loss.  Especially considering the lockdown includes the usual busy Easter period when airlines smile to the bank. IATA projects that the losses could amount to US$ 0.76 billion revenue for the industry and US$0.65 billion in contribution to Nigeria’s economy.

Despite aircrafts being grounded however, the scheduled maintenance does not change, which implies that at resumption of flights, many aircrafts might be due for maintenance without generating the projected revenue to pay for lease, fuel suppliers, caterers, among other obligations.

None of these would compare to the human cost in terms of life as one operator said.

“We consider the health and wellness of our staff and passengers a priority above the financial consideration,” an operator said.

The impending job losses is creating panic in the industry with some airlines already struggling to pay staff salaries. One of the airlines already issued a memo informing staff that it would not be able to continue paying salaries. More airlines might follow suit unless the FG urgently intervenes.

Although the Central Bank of Nigeria (CBN) has been announcing some measures to mitigate the impact of the pandemic on the nation’s economy, including the N1.1tn intervention fund announced last week to support critical sectors of the economy, no specific funding support has been announced for the aviation sector.

Chairman of Airline Operators of Nigeria (AON), Capt. Nogie Meggison, has urged Nigerian aviation regulatory authorities to follow the CBN example by providing support for domestic airlines, and by so doing, saving thousands of jobs now under threat.

“Nigerian airlines are suffering from the impact of the Coronavirus issue as the passenger numbers have dropped drastically and our overheads remain the same on many fronts, and even increasing significantly on other fronts. Like we all know, Nigerian airlines trade in naira, but we do our business in dollars, and the naira has come under pressure since the Coronavirus pandemic,” he said.

“The agencies should, therefore, help the airlines by immediately streamlining the over 32 multiple charges given to airlines which are mostly double billing. Government should also bear 100 per cent cost of disinfecting all aircraft for this period and provide thermal scanners and hand sanitizers, as well as mobilise more manpower and training of health personnel at our local airports to encourage more people to travel.”

He added that this is not an unusual demand as in the US, airlines are seeking a $50bn bailout and as part of its response, an Emergency Stimulus Package was passed by the US Senate and House which reduced interest rate to 0.25 per cent.

President of Aviation Roundtable and Safety Initiative (ART), Dr. Gbenga Olowo said government would have no option than to come to the aid of the airlines.

“Government guarantees and indemnities would be useful for identified credible operators. Who are the ones bleeding as a result of the COVID-19 pandemic? Principally the Airlines and its service providers; fuel providers, travel agents, global distribution system, on-board meal providers, etc. How do we protect jobs in aviation in Nigeria? Most workers may lose their jobs at this difficult period but continued training and human capital investment remains the key to job protection,” he said.

A member of the Aviation Roundtable (ART), Mr. Olumide Ohunayo, said government must come to the aid of all registered carriers whose operations would be affected by the disruptions caused by the pandemic.

He said there could be financial incentive, loan or corporate bonds through the CBN or tax rebate to airlines and other allied services.

“Looking at what our counterparts are doing in other economies, the airlines are getting the sympathy and support of their governments to ensure that they stay afloat and as much as possible reduce retrenchment to the barest minimum.

“Retrenchment of staff is inevitable in this period we are in. It is already estimated that by the month of May, most airlines would have been crawling for liquidation. That is how bad it is,” the industry expert stressed.

If measures are not taken to save the airlines, it may soon happen that a virus brought down the entire airline industry of a country and the millions of lives that rely on it for their livelihoods.